Paul Ryan’s “Individual Mandate”

Even before President Obama’s new health reform law was enacted, Republicans insisted that its “individual mandate” was an “unprecedented” assault on individual freedom. They have branded this mandate, which would require that most Americans who can afford it carry health insurance or pay a tax penalty, is uniquely egregious because it “compels” people to buy a “commercial product”—a scarifying precedent for mandating the forced purchase of GM cars, health club memberships, or even the dreaded broccoli. A month ago, on March 28, 49 House Republicans signed a brief pushing all these rhetorical buttons in urging a federal appeals court in Atlanta to overturn the entire health care law on the ground that the mandate unconstitutionally “places Americans’ economic liberty at risk.”

Given this history, it would be surprising if Republicans were to endorse a comparably freedom-squelching measure in another bill. But on April 15, that is essentially what they did, when all but four of the 239-member House Republican Caucus approved Rep. Paul Ryan’s fiscal 2012 budget resolution, the successor to Ryan’s “Roadmap for America’s Future” plan for massive tax and spending cuts. *

Ryan’s roadmap would reshape Americans’ access to health insurance mainly through two provisions, both of which pressure people to purchase private health insurance to an extent and through mechanisms that are materially indistinguishable from the supposedly toxic Obamacare mandate. One of these Ryan proposals—as yet little noticed by pundits or politicians—is almost an exact copy of a provision in the Affordable Care Act. * It would repeal the current exclusion from employees’ income of employer contributions to their health insurance premiums, thus terminating the subsidized employer-sponsored group health regime that covers nearly 60 percent of all Americans. In its place, the Republican plan would substitute a refundable tax credit, to be provided to individuals who purchase health insurance (or to employers who purchase health insurance for their employees). When this new arrangement takes effect in 2022, the tax credit would be set at $2,300 per adult and $1,700 per child, not to exceed $5,700 per family.

Like this Ryancare tax incentive, the “individual mandate” section of the ACA, which the White House calls the “individual responsibility” provision, constitutes a pay-or-play option. Beginning Jan. 1, 2014, when the ACA provision takes effect, individuals who do not qualify for exemption on hardship or other specified grounds, must either carry health insurance or pay a tax penalty as part of their annual income tax filing. The ACA caps individuals’ penalty liability at 2.5 percent of household income above the filing threshold, or a flat dollar amount ranging from $695 to $2,085, depending on family size.

Under both provisions, the result is the same: People who choose to carry health insurance have a lower tax bill than they would if they chose not to. In terms of their respective potential impact on individuals’ bank accounts and tax liability, the manner in which they affect individuals’ financial incentives, and hence the constraining effect on individuals’ financial choices to either buy or forgo health insurance, the two “mandate” provisions are identical. (Indeed, in most cases, the financial difference for the individual taxpayer made by the Republican tax credit would be greater—i.e., more “coercive”—than the ACA tax penalty.)

In addition to cloning the ACA’s framework for coverage of adults under 65, the Ryan plan would also apply a similar approach to Americans currently covered by Medicare. * Beginning in 2021, former Medicare-eligibles would receive a voucher they can apply to the purchase of private insurance. According to the Congressional Budget Office, the vouchers would be worth approximately $6,000 for recipients age 65, and would be greater for older recipients, averaging $11,000 across the entire Medicare population. Of course, Americans would be required to continue to pay their annual Medicare tax throughout their working lives. Hence, the Republicans’ proposal to replace Medicare with partially subsidized private insurance also operates to “compel” people to pay for private health insurance policies. Moreover, this mandate is not even a pay-or-play option; Medicare taxes are mandatory, whether workers want to buy eligibility for old-age vouchers or not.

In yet another ACA-copycat provision, the Ryan proposal would require Medicare-replacing private policies to be offered and sold through government-established and regulated exchanges. * Retreating in the face of Democrats’ attacks and negative polls about curtailing Medicare, Republicans have acknowledged this particular piece of common ground. As House Speaker John Boehner told ABC News, Ryan’s proposal “transforms Medicare into a plan that’s very similar to the president’s own health care bill.” (Of course, the president’s plan doesn’t transform Medicare as a public guaranteed benefit program at all; its tax-incentive approach applies only to adults under 65 for whom no such public option is currently available.) But neither Republicans nor, as yet, their critics have spotlighted their two-fold embrace of the very ACA “mandate” provision that they so relentlessly vilified.

These Ryancare mandate lookalikes are not merely evidence of Republicans’ political hypocrisy. They bear heavily on the asserted legal basis for the pending court challenges to the constitutionality of the ACA mandate provision. The ACA’s combination of tax incentives and subsidies is functionally equivalent not only to Republicans’ proposals for amending the existing social safety net, but to existing guarantees enacted long ago. Social Security benefits are secured by a combination of employee income taxes and employer excise taxes. Unemployment compensation, part of the original Social Security Act, and like its old-age provisions, upheld by landmark Supreme Court decisions in 1937, is structured by a conditional tax on employers, offset by a tax credit if they contribute to state unemployment funds. Medicare similarly prescribes individual contributions in the form of taxes in exchange for post-65 health insurance coverage.

Overturning the ACA mandate would contravene the decisions and legal principles that upheld these other mainstays of the national safety net as well as validating the Republicans’ proposal. Because most income earners already have health insurance, the ACA’s penalty approach not only matches the result of the Ryancare tax credit but is more efficient—for the government, taxpayers, and insurers. Since the earliest days of the Republic, it has been black-letter law that, as Chief Justice John Marshall famously held in 1819, Congress can select any means “plainly adapted” to a valid end, and “[i]t can never have been [the framers’] intention to clog and embarrass [Congress’ execution of its powers] by withholding the most appropriate means.”

So far, the five federal trial courts that have ruled on the ACA challenges have focused little attention on the administration’s claim that the mandate lawfully deploys Congress’ power to tax and spend for the general welfare. Even the three judges who have upheld the mandate have relied exclusively on Congress’ power to regulate interstate commerce, essentially finessing the tax-and-spend argument. Perhaps appellate courts will take a different tack, in light of the House Republicans’ flip-flop on tax-and-spend social insurance mandates. We will soon know which way this wind is blowing. Oral arguments in the appeals of the ACA legal challenges are coming up—May 10 before a panel of 4th Circuit judges in Richmond, Va., June 1 before a 6th Circuit panel in Cincinnati, and June 8 before the 11th Circuit in Atlanta.

Politicians may be expected to talk out of both sides of their mouths. But judges are expected to follow established precedent, and to set precedents they expect to be followed. That means that if the ACA mandates are unconstitutional, the Ryancare mandates must be as well.

Correction, May 4, 2011: This article originally referred to Rep. Paul Ryan’s budget resolution, passed by the House in April. All such references should have been to Ryan’s “Roadmap for America’s Future,” an earlier proposal that is more detailed than the budget resolution. (Return to top.)